When 2008 began, India's retail industry was gung-ho and even luxury goods retailers were eyeing India as the next big thing, reports Radhika Pancholi.

When 2008 began, India's retail industry was gung-ho and even luxury goods retailers were eyeing India as the next big thing. Behemoths such as Mukesh Ambani’s Reliance Retail expanded operations as did Kishore Biyani-led Future Group, which launched KB's Fairprice, a deep-discount store chain. But now, old-fashioned shops are back in the limelight.

“The organised sector has seen a growth of 5 – 10 per cent during the year, but the unorganised sector is currently growing faster,” said Vijay Bobba founding CEO of i-mint, a customer loyalty programme.

Organised retail is buckling under a local slowdown and global meltdown.

E Balaji, CEO of human resource consultant E. Balaji, said expansion plans were deferred as prospects of foreign players entering the retail sector ebbed amid a howl of protests from small shops and politicians. From large-scale hiring, the mood turned to attrition and layoffs.

However, the industry may bounce back by mid-2009, because experts like Naimish Dave of OC&C Consultants believe a high savings rate of nearly 30 per cent and India’s insulation from the global meltdown augur well for India.

Discount chains are hotter, but creamy luxury labels are on the retreat.

“Sales of luxury brands and impulsive purchases will take a hit,” said Bobba. “One positive aspect of this slowdown was that rents came down to a more realistic level, helping retailers get better deals for shop space,” said Dave.

Discount turned the flavour of the year as inflation soared.

“While the market may have played havoc with many sectors, the correction has worked in our favour as people get more price conscious," said Jay Gupta, managing director of the discount chain The Loot.